A Study of Success Factors in Green Supply Chain in Manufacturing Companies in Malaysia

AbstractEnvironmental issues have become a notably prevalent concern for governments, societies and business

organizations. With environmental problems such as global

warming, ozone depletion, solid waste and air pollution,

business organizations are considered to be the source of most

of the environmental problems. In Malaysia, manufacturing

industry is one of the main contributors for the economic

growth. Unfortunately, it has been caused for environmental

deterioration. (DOE, 2013). In order to investigate further

understand GSCM among manufacturers in Malaysia, This

study has carry out survey to 241 of 522 certified companies MS

ISO 14001 in Malaysia is 522 companies. One of the results are

consistent with the study of Rao (2007) who found that there is a

manufacturing company that cannot sell and distribute raw

materials internally to other companies or external use as raw

material and subject to confidentiality policies. It is the raw

material control gives a competitive edge in the market,

especially in industries that are based on advanced technology

(Zhu et al. 2012).

Index TermsGreen supply chain management,

manufacturers.

I. INTRODUCTION

Environmental issues have become a notably prevalent

concern for governments, societies and business

organizations. With environmental problems such as global

warming, ozone depletion, solid waste and air pollution,

business organizations are considered to be the source of

most of the environmental problems. In Malaysia,

manufacturing industry is one of the main contributors for the

economic growth. Unfortunately, it has been caused for

environmental deterioration [1]. This is because the

industries produce more emissions compare to other

industries when manufacturing the productivity in order to

fulfill consumer needs and demands. For example, since

2007 to 2009, the number of water pollution contributed by

Manufacturing industry have been gradually increased as

indicated in Table I.

Thus figure indicated that manufacturing industry is one of

the main contributors to the deterioration of environmental

sustainability. Thus, the concept of green supply chain

management (GSCM is now gaining importance since it can

help to minimize negative impact of the industrial processes

but can also enhance the competitive advantage of the firms

[2].

This study looks at the green initiatives and factors that

triggered such initiatives among manufacturers in Malaysia.

Manuscript received September 11, 2013; revised November 12, 2013.

Norlinda Mohd Rozar is with the North University Malaysia, Malaysia

(e-mail: [email protected]).

Malaysian manufacturing sector has remained to be an

important contributor to Malaysian economy. In the three

quarter of 2009, value-added of the manufacturing sector

declined by 13.7 percent given the less favorable external

economic environment. The sector accounted for 26.8

percent of gross domestic product (GDP) during this period.

Transition exports of manufactured products decreased by

14.1 per cent from RM432.6 billion in 2008

(January-November) to RM371.5 billion in 2009

(January-November), accounting for 74.5 per cent of

Malaysias total exports from January to November 2009.

Employment in manufacturing sector was estimated at 3.3

million peoples or 28.4 per cent of total employment in 2009

[3].

TABLE I: NUMBER OF WATER POLLUTION POINT SOURCES PRODUCED BY

MANUFACTURING INDUSTRY (2005-2010)

Sources: Department of environment annual report 2012

Essentially, in green initiative has taken seriously by the

Malaysian government [1]-[4]. Such as Environmental

Quality Act of 1974 and other environmental laws are

administered by the Division of Environment. Clean-air

legislation was adopted in 1978, limiting industrial and

automobile emissions and included the use of

environment-friendly biomass boilers, its various corporate

social responsibility initiatives. Example, in Taman Suria,

Batang Berjuntai, it spending over RM5mil annually to treat

effluents and emissions to ensure that these met requirements,

[1]. Malaysia had attracted almost RM12 billion in

investments from the solar photovoltaics industry through

FDIs, from top companies such as First Solar, Sun Power, Q-Cells and Tokuyama, [4].

The situation thats raise to the arguments question is

How extent the GSCM implementation in manufacturing

industries and what are the success factors to ensure the

implementation of GSCM will influence to the impact of

firms performance?

A Study of Success Factors in Green Supply Chain

Management in Manufacturing Industries in Malaysia

Norlinda Mohd Rozar, Wan Hasrulnizzam Wan Mahmood, Abdullah Ibrahim, and Muhammad

Ashlyzan Razik

DOI: 10.7763/JOEBM.2015.V3.196 287

Journal of Economics, Business and Management, Vol. 3, No. 2, February 2015

II. LITERATURE REVIEW

A. Green Supply Chain Management

In order to realize the sustainable development of

eco-friendly, controlled use of natural resources enhanced to

minimize the negative influence on the environment. To

focus on green technology applications in every industrial

activity including supply is believed to affect the

performance of the global environment. It includes the

development and application of products, equipment,

systems and natural resources that can reduce the negative

effects of human activities [5].

Literature proves that the organization should adopt green

technology approach for being an environmentally friendly

company social responsibility. Manaktola and Jauhari (2007)

[6]. found that environmental sustainability efforts need to

involve multiple parties, including customers and suppliers in

a supply chain. It is supported by Baharum and Pitt (2009) [7].

that identifies the key success factors in green practices also

influenced by external third parties or companies. Various

approaches have been used to improve the efficiency of green

technology. However, this study focuses on the green supply

chain management (or GSCM), which is an important

approach in generating breakthrough green technology

applications ([8]. Rao (2007) [9]. Found that GSCM is

innovative in the supply chain management and operational

performance driven environment, including environmental

management systems (EMS) and ISO 14001 certification.

The increase in environmental regulations Pilkington &

Dyerson (2006) [10]. Urged the organization to join the

GSCM and increase competition in terms of product

manufacturing, inventory management, suppliers, customers,

and systems infrastructure in a global supply chain

management [11].

There are various definitions and concepts have been

discussed in the literature, however, there is no special

definition describes GSCM and its applications [12]-[15].

GSCM can be defined according to the study of philosophy in

which the elements of supply chain management (or SCM)

and the environment are combined in one concept [16]-[5]. It

depends on the perspective and purpose of GSCM

implementation in an organization [17]. Kovcs (2008) [18].

Defines the GSCM as a strategy to minimize the negative

impact on the environment through activities within the

organization and supply chain. It also prioritizes cooperation

with suppliers and customers in the product development

process [19]. Vachon and Klassen (2006A) [12]. Found that

the cooperation between suppliers and customers to improve

organizational performance. In fact, Hart (1995) [20]. Found

that the implementation of GSCM improve information

sharing capabilities that provide a competitive advantage to

the organization in line with the process of environmental

sustainability.

B. Critical Success Factors for the Implementation GSCM

Beamon (1999) [21]. found that the identification

requirement or customer focus is the key critical success

factor in GSCM including companies in China [22]. As well

as several companies in Southeast Asia [17]-[23]. Laroche et

al . (2001) [24] argues that this factor influenced the trend

that customers are now more aware of the environment.

Global negative effects on the environment gives a reminder

to all members of the community that this problem is a shared

responsibility [25]. Therefore, meet customer requirements

including product attributes that influence the value and cost

can give a positive result of investments in the GSCM [26].

Organizations need to act proactively in order to improve

the operational efficiency of production as competition has

become more competitive [27]. It is driven by the actions of

some customers to reduce the cost of purchase for the next

year without affecting the output capacity [28]. Zhu and

Sarkis (2004) [16], pointed out that organizations need to be

sensitive to changes during operation and maximize

production with the application of green technology as an

agent in continuous improvement activities.

III. METHODS

In order to investigate further understand GSCM among

manufacturers in Malaysia, The number of certified

companies MS ISO 14001 in Malaysia until 2009 is 522

companies. However, only about 241 selected as the study

population. The judgmental sampling was used in the

selection process. This method was chosen because the

researchers targets specific type or subjects who have the

expertise or information that very important to the study. The

objectives of the study are to investigate GSCM among

manufacturers in Malaysia. Therefore firms with ISO 14001

certification have been chosen to take part in the interviews.

The reason why this type of companies were selected because

the ISO 14001 certified companies were selected because

they were expected to adopt the green initiatives within their

operations [29]. Since this research solicits information on

green issues operations, the best person that should be the

respondent from each firm is the person who possesses

knowledge and information on this field. Standards and

Industrial Research Institute of Malaysia (SIRIM) as the

certification organization for ISO 14001 usually appoint an

Environmental Management Representatives (EMR) to act as

a link between the certification organization and the certified

firms [29]. The interview sessions were held at respondents

premises and each session took about one hour. The

interviews were semi structured but guided by a list of open

ended questions. Prior to the interview sessions, the

interviewer gave a brief explanation on the study.

Immediately after the interviews, the information was

transcribed for further analysis. These interviews were

conducted as the supplement for a survey questionnaire of

116 firms, which served as another component in the data

collection process. However, only the findings from the case

study are discussed for this paper. Based on Yin (2003) [30].

Data analysis in this study started with an in depth study of

each firm. The cases were then compared with other cases in

cross case analysis to see the pattern of GSCM factors and

practices.

IV. RESEARCH FINDING

Fig. 1 shows the mean scores GSCM critical success factor

for the company in the form of graphs respondents prioritized

the highest mean score to lowest mean score. The mean score

for all factors above 3.00 indicating a positive response by the

respondent to the list of critical success factors listed in the

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survey. Results clearly show that each critical success factor

has a role in the GSCM as study Rao (2002,

2007)[17]-[9].Found that identifying customer needs and

focus , CSF1 is a critical success factor GSCM most

important among the respondents with the mean score of

3.63 . The results support the study of Zhu and Sarkis (2004)

[16]. Who found that customers are now more aware of

environmental problems and successes GSCM highly

influenced by the customer. In the meantime, ensure

customer complaints are handled properly, CSF 6, is the

second major factor for the success of GSCM. It will be noted

that these factors are also associated with the customer factor,

but it is more proactive [31]. This is because; the complaint

also is a claim that should be met to obtain customer

satisfaction in the long run [32]. However, it is also subject to

the organization's dependence on customers because for

some products, the customer was not directly involved in

product improvement activities [33].

Fig. 1. Mean score of critical success factors GSCM.

Table II shows the Spearman correlation test results for the

critical success factors GSCM. Found that most of the factors

have significant relationships with other critical success

factors in the level of 0.01 and 0.05, except the couple of

factors determine the production or operating procedures to

ensure increased efficiency, CSF2, and ensure training needs,

attendance by topic, CSF5, and identify requirements and

customer focus, CSF1 to update the documentation to ensure

that workers perform tasks, CSF3 and ensure customer

complaints are handled properly, CSF6. From Table II found

employee involvement and training, and to identify problems

CSF10 nonconformities, CSF10 have a strong correlation. It

was followed by a couple of factors that ensure employees

update documentation for the job, and ensure minimization

CSF3 and commitment to nonconformities problem repeal,

CSF7 a moderately strong correlation strength. These results

indicate that each of these factors is interrelated to one

another influential. In other words, the activities in the critical

success factors GSCM also have an impact on other factors

though the correlation weak or very weak.

TABLE II: SPEARMAN CORRELATION TEST RESULTS FOR THE CRITICAL SUCCESS FACTORS GSCM

These results support the study Vachon and Klassen

(2006A, 2006b) [12]. Have also found that there is a critical

success factor significantly interrelated. Sarkis (2006) [5].

Found critical success factors is the "soft factors are not easy

to implement, but it has in common with each other that can

be complementary in GSCM. In fact, it also can create a work

environment more manageable [35]. Therefore, identifying

the relationship between critical success factors will motivate

organizations to choose or pay more attention to the factors

that are relevant to the workplace environment, particularly

in supply chain management.

Malaysian manufacturing companies prefer to use

Critical

Success

Factor

of GSCM

CSF2 0.593**

CSF3 0.152 0.400**

CSF4 0.398** 0.507** 0.614**

CSF5 0.250* 0.178 0.400** 0.457**

CSF6 0.084 0.206* 0.604** 0.375** 0.366**

CSF7 0.195* 0.443** 0.679** 0.468** 0.426** 0.583**

CSF8 0.376** 0.514** 0.339** 0.366** 0.536** 0.326** 0.493**

CSF9 0.355** 0.495** 0.478** 0.503** 0.432** 0.414** 0.518** 0.572**

CSF10 0.412** 0.482** 0.248* 0.387** 0.545** 0.217* 0.403** 0.714** 0.618**

CSF11 0.333** 0.392** 0.313** 0.451** 0.479** 0.355** 0.383** 0.409** 0.457** 0.546**

CSF12 0.300** 0.493** 0.365** 0.493** 0.436** 0.274** 0.278** 0.574** 0.333** 0.556** 0.451**

Note

*significance level 0.05; **signifiance level 0.01

CSF7 CSF8 CSF9 CSF10 CSF11CSF1 CSF2 CSF3 CSF4 CSF5 CSF6

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recycled materials as compared with material internal or

external recycling companies. Chiang et al. (2010) [36].

Found that manufacturing companies to do so in order to

optimize existing resources but it can provide the raw

material cost savings and continuous improvement to product

processing methods. These results are also consistent with the

study of Rao (2007) [9]. Who found that there is a

manufacturing company that cannot sell and distribute raw

materials internally to other companies or external use as raw

material and subject to confidentiality policies? It is the raw

material control gives a competitive edge in the market,

especially in industries that are based on advanced

technology [14].

Implication

Investigate why and what companies are doing at the

moment in terms of GSCM practices enable practitioners and

researchers to think about strategies that can bring better

results. Future studies should focus on the relationship

between GSCM factors and practices of Malaysian

manufacturers. Identification and analysis of the current

situation is the main contribution of this paper to the body of

knowledge. Managers need to be aware of the pressures that

drive companies to engage with GSCM practices. Good

managers will respond and act accordingly to the pressure

received by their firm but the best managers will think and be

proactive in analyzing factors that urged them to take green

initiatives. In addition, managers must be aware of the

capacity and ability of their firms before implementing any

green practices. Making good decisions in determining green

activities to be implemented in firms will lead to better results

without compromising their business objectives to maximize

shareholder wealth.

V. CONCLUSION

Results of this study show that GSCM is now gaining

momentum in Malaysia. The firm began implementing green

practices and it probably will continue because there is a

demand and some push and pull factors that encourage them

to do so. From the interview , it is known that those four firms

merge GSCM to meet the needs of their customers , in order

to comply with applicable laws and regulations, as a

marketing strategy , to become more competitive in the

market and as influenced by the commitment and support of

the their top management . Acceptance GSCM practices vary

depending on the firms products and services. Basically,

companies involved in green purchasing and implementing

green practices internal as their efforts to support the

greening of the supply chain. In addition, some companies do

logistics, reverse eco design and work with their chain

partners in maintaining green business strategy. Although

still relatively new GSCM approach in Malaysia, it has been

implemented by manufacturing firms in Malaysia.

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Norlinda Binti Mohd Rozar graduated with

economics degree from North University

Malaysia, 2002. She then completed Master of

Technology Management in University Malaysia

Pahang, 2011. She is currently completing a PhD

of Technology Management in University

Malaysia Pahang, 2012/2013. Norlinda has

worked at various practices in Malaysia, industry

since 2003. Her work area of finance and

company management. She has start work as a Finance Executive,

prepare financial statement and monthly forecast of the company. At the

same time she organize and conducted internal training for staffs. In 2008, she has also worked in audit area for SOX (Sarbanes Oxley) in

a one of the Brussels company in Malaysia. Currently, she has own

business in training consultation for some institute of education.

Therefore, she is to go further in research in term of technology

management.

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A Study of Success Factors in Green Supply Chain in Manufacturing Companies in Malaysia